Economic stakes are high as nation debates immigration

Published 7:00 pm, Saturday, May 15, 2010

Seldom has affixing a signature to a document brewed such a firestorm as that which has followed Gov. Jan Brewer's signing of the new Arizona Immigration Law almost three weeks ago.

Reaction to the passage of SB1070 has been quick and varied. From Washington, D.C. to California and states in between, politicians, pundits, and ordinary citizens have been free with their comments, many of which have been based more on fears and possibilities than facts.

The bill (scheduled to go into effect in August) authorizes Arizona police to check the legal status of anyone suspected of being in the U.S. illegally if the person is also considered to be a participant in an unlawful act. (This is a notable change from an earlier draft which allowed the checks for any reason.) Governor Brewer has specifically prohibited state law enforcement officers from engaging in racial profiling and has authorized special training to be instituted prior to the law's implementation in order to assist police in proper procedures for enforcement. Even so, the immigration debate is raging and, such a limitation would likely be impossible to enforce.

No one denies that the Constitution explicitly puts the protection of our nation's borders in the hands of the federal government. Through the years, various attempts have been made to secure the 1,969-mile boundary between the U.S. and Mexico, of which nearly 20 percent forms the southern Arizona border. However, political leaders in Arizona claim that all such attempts have failed to thwart the thousands who continue to cross into their state illegally.

The last major federal government effort to curb illegal immigration was in 2007 when President George Bush attempted comprehensive immigration reform but was not successful. According to the National Conference of State Legislatures, since then, 48 states have considered measures to reform immigration laws. Last year, state legislatures enacted 222 laws and 131 resolutions on the subject. None of them, of course, were as strident or comprehensive as the one recently approved by the Grand Canyon State.

Arizona officials, claiming the state had basically been receiving only empty promises from Washington, decided to take unilateral action in response to the all-too-common violence along the border. Although the state law amounts to little more than a call to enforce federal requirements, this past weekend, thousands of those who objected to the Arizona law staged protests and marches in many of the major cities across the country. Declarations of the law being both unfair and unconstitutional took center stage. Calls for boycotts rang out loud, and some parents even began to give consideration of removing their youth from the state university.

In a 2008 study, my firm, The Perryman Group, found clear evidence that undocumented workers are currently making contributions to the U.S. economy and society, especially in certain industries and occupations. If all undocumented workers were removed from the workforce, a number of industries would face substantial shortages of workers, and Americans would have to be induced into the labor pool or provided incentives to take jobs far below their current education and skill levels. For the U.S. as a whole, the short-term negative effect of eliminating the undocumented workforce would include an estimated $651.5 billion in annual lost output (gross product) and 8.1 million lost jobs.

Even after the economy had a chance to adjust, the economic cost of eliminating this important resource would include almost $245 billion in lost output each year and more than 2.8 million less jobs. In addition, the adjustment process would be difficult to achieve in a reasonable period of time. Evidence suggests that many agricultural enterprises are not sufficiently strong financially to survive even a single year in which crops could not be harvested and marketed. Thus, the underlying productive apparatus would be dismantled, resulting in lengthy delays and substantial obstacles to efforts to overcome the initial effects. Similarly, the inability to complete construction projects in a timely manner could lead to alternative and suboptimal land use that would have lasting adverse consequences. Many communities that are dependent on tourism would also have their fundamental structures undermined in a permanent fashion.

Additionally, the adjustment process would likely require substantial wage escalation, thus eroding competitiveness in global markets. While there are a number of native-born Americans who are unemployed, the skill and education levels are highly mismatched with the types of jobs that undocumented workers typically fill. Growth in the domestic workforce is quite modest, and the geographical distribution of available U.S. workers relative to high concentrations of undocumented labor is also not conducive to extensive substitution, as the undocumented immigrants tend to locate in areas of high demand.

Clearly, the economic stakes are high, and any policy should be carefully implemented to avoid excessive fallout. Whatever may be the eventual changes in U.S. immigration policies and practices, there is no doubt that the new Arizona law has been the catalyst that has once again pushed the subject to the front burner of the political spectrum at a most inopportune time for those seeking election or re-election. Solutions are being demanded, and the outcomes of numerous impending local, state, and national races, as well as our national culture, could be impacted by forthcoming decisions. There is no doubt that responsible reform is needed, but it must be structured in a manner that realistically recognizes the realties of the U.S. economy.

Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.